AfrAsia 'quarantines' troubled Zim unit

HARARE - Mauritius-based AfrAsia Bank Limited (AfrAsia) has decided to exclude its troubled subsidiary AfrAsia Zimbabwe Holdings Limited (AZHL) from the group’s consolidated accounts in a move it said will “isolate any additional risks”.

This comes as the Zimbabwean financial group is facing viability challenges.

Arnaud Lagesse, AfrAsia chairman, said “entities of the group will be split between a banking cluster and a non-banking cluster, and within the banking cluster, the Zimbabwe entities will cease to be subsidiaries of the Bank and will be held separately.”

“…dealing in Africa is not risk free, as our investment in Zimbabwe has demonstrated,” he said in the group’s 2014 annual report, adding that “concurrently, we have ensured that the risks of Zimbabwe are ring-fenced and do not affect our main stream operations on the AfrAsia Bank balance sheet.”

AZHL’s flagship banking unit AfrAsia Bank Zimbabwe Limited (ABZL) is currently facing capitalisation and solvency challenges.

ABZL failed to meet the Reserve Bank of Zimbabwe’s $25 million minimum capitalisation whose deadline was end of June 2014.

As at September 30 2014, the bank’s capital stood at $13 million.

Recently, the hard pressed AZHL announced plans to dispose its micro-lending subsidiary MicroKing, as part of efforts to raise capital.

The challenges have weighed down on the James Benoit-led Mauritian financial group, which recently increased its stake in AZHL to 62,5 percent after acquiring founding chief executive Nigel Chanakira’s 33 percent shareholding.

Lagesse said AfrAsia had embarked on a restructuring plan that will see the creation of a top holding company named AfrAsia Financial Holdings Limited.

“This will also ensure that the Zimbabwe investment is further ring-fenced and help isolate any potential additional risks associated therewith,” he said.

Meanwhile, AfrAsia closed its seventh year of operations on a solid note, reporting an operating profit of $15,88 million (MUR 506m) in the year to June 2014, a 49 percent increase on the previous year.

“However, an unfavourable liquidity situation prevailing in Zimbabwe and significant losses incurred by AfrAsia Bank Zimbabwe Limited affected the Bank’s results considerably. Giving rise to an impairment loss of $6,81million (MUR 217m) on its investment in Zimbabwe and a net credit impairment of $3,39 million (MUR 108m) on a loan to its subsidiary,” the group reported in its results for the period under review.

As a result, the profit of the bank for the year ended June 30 2014 amounted to $7 million (MUR 223m).

“The Group’s results were more subdued, being affected by negative returns from its investment made in Zimbabwe through its associate, mainly due to non-performing loans,” the group said.

Last month, AZHL engaged finance group Imara Capital Finance to jointly market a medium term secured note, expected to raise $15 million in liquidity.

The group said several prospective investors expressed interest in making equity investment into AZHL or ABZL.

The note, to be drawn in tranches, is expected to generate the $15 million incrementally, with the first tranche to be drawn towards the end of this month.

Comments (1)

If AZHL was excluded from the group's consolidated financial statements, then why was an impairment loss recorded? Let's not mislead readers with erroneous reporting.

Hmmm - 8 January 2015

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